Financial Facts: Under contract, now what happens?

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You have shopped for that new home, you made an offer to buy the property and now the seller has agreed to your offer, now what? If you are a cash buyer the process is almost over. With cash, you review the title papers and you may get an inspection and even an appraisal. Then, if all is well, you show up at the title company and sign the documents, give them the cash and you now own the property.

If you are buying the real estate and a mortgage is required to finance the property, there are lots of things that now must occur prior to you showing up at the title company to sign the documents.

The first thing you need to do as a buyer is get with your mortgage professional. Hopefully you have already met with them prior to making the offer to buy, but if not, get with them now. At this point you will make formal application for the mortgage.

The application process is a simple completing of a few documents. The mortgage professional will ask questions about the property you have under contract, they will want to know your income, your employment history and where you bank. They will want to know if you own other real estate and if you are suing or being sued. Plus, they will want to know what mortgage program you have considered.

At this time you may or may not lock in the interest rate and mortgage program. Some buyers have completed a lot of work by getting with mortgage people prior and know which program works best for them. In fact, the buyer, if they are really on the ball, will have already been pre-approved for the mortgage and all that is missing is the property itself.

The next things that will happen is that the appraisal of the property will be ordered. The appraiser will set an appointment and stop by the home to check its condition, measure the rooms and take numerous photographs. I always make sure we have a local appraiser who is familiar with the area, too.

Then, if the property is a condo, I fax the property manager a condo questionnaire. This is a requirement of all mortgage lenders as they want to know if the property is involved in any litigation, the numbers of condos in the complex and if any one person or entity owns more than 10 percent of the total units. The investor may even want to see a condominium association budget to determine if there are any financial concerns, especially with older complexes which may be in need of repair.

While all of this is occurring, the mortgage professional will be obtaining from the potential borrower copies of federal taxes, current pay stubs and bank statements plus other personal financial documents. Then they will package all of this information and submit it on to an underwriter.

The underwriter will then review all the documents to determine if the borrower has met the requirements needed to receive loan approval. The underwriter may ask for additional information or clarification of existing documents. Their bottom line is to get what is necessary to get the loan approved. Keep in mind that the underwriters job is to try to get the loan approved, not deny the deal. If all deals are denied, the lender and the underwriter will be out of jobs very quickly.

Finally, after all of this we should have an approved loan, an appraisal that is equal to or more than the contract purchase price and the title insurance and building insurance in order. We have a deal that is close to being a done deal. The time and place for the signing of documents is set and the buyer brings in their down payment, signs the dozens of documents and we now have a new homeowner.

So once the purchase offer is signed, there is a lot of work to do prior to the buyer becoming an owner.

As a buyer, you will see only a small percent of the work that goes on behind the scenes to get you to the closing table. And know that all involved want the deal to close, because if it does not close, the real estate agent, the mortgage professional and others do not get paid, the buyer does not get the property and the seller does not sell the property and get their check.

For answers to your mortgage related questions, call Bob Kieber at (970) 453-4700 or email him at rkieber@centennialbanking.com. Kieber is a local mortgage lender with Centennial Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country. Member FDIC, Equal Housing Lender. NMLS Bank #401640 Broker #289610. For tax benefit information please consult with a professional tax advisor. The opinions expressed are those of the individual, and do not necessarily reflect those of Centennial Bank.